Simulated test markets (stms) are often run in shopping malls where consumers are

10

Developing New Products and Services

LEARNING OBJECTIVES

After reading this chapter you should be able to:

LO 10-1Recognize the various terms that pertain to products and services.

LO 10-2Identify the ways in which consumer and business products and services can be classified.

LO 10-3Explain the significance of “newness” in new products and services as it relates to the degree of consumer learning involved.

LO 10-4Describe the factors contributing to the success or failure of a new product or service.

LO 10-5Explain the purposes of each step of the new-product process.

APPLE: THE WORLD-CLASS NEW-PRODUCT MACHINE

The stage in front of an auditorium was empty except for a chair, a table, and a huge screen with a large white logo. Then, in walked a legend ready for his magic show in his black mock turtleneck, jeans, and gray New Balance sneakers.

Apple’s Innovation Machine

The legend, of course, was Steve Jobs (opposite page, at left), co-founder and former chairman of the board of Apple Inc., who died in October 2011. Advertising Age anointed Steve Jobs as Marketer of the Decade. Fortunerated Apple as the world’s most-admired company, while Bloomberg Businessweek has perennially identified Apple as the world’s most innovative company. The magic shows Jobs orchestrated over the years introduced many to Apple’s marketchanging innovations, such as the:

•Apple II—the first commercial personal computer (1977).

•Macintosh—the first personal computer (PC) with a mouse and a graphical user interface (1984).

•iPod—the first and most successful MP3 music player (2001).

•iPhone—the world’s best multitouch smartphone and media player with almost one million apps (2007).

•iPad (2010) and iPad mini (2012)—the thin tablet devices that allow users to read books, newspapers, magazines, and even textbooks!

•Mac Pro—the innovative black cylinder that will be the fastest desktop PC on the planet (2013)!

Steve Jobs’s innovations revolutionized six industries: personal computing, digitally animated movies (when he was CEO of Pixar), music, smartphones, tablet computing, and digital publishing.1 Jobs even designed and holds the patent on the staircase seen in major Apple retail stores. He said, “You want that stairway so people believe they’re in someplace magical.”2

When Steve Jobs named Tim Cook (opposite page, at right) to be Apple’s chief executive officer, his charge to Cook was simple: “Just do what’s right.” And under Cook, Apple has continued to deliver record sales and profits. However, as this chapter reveals, developing successful new products is difficult. Tim Cook’s challenge as the CEO of Apple will be to market new innovations to drive the company’s future growth.3

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QR 10-1

Apple iPad Ad

iCloud: Where the Digital Lifestyle Is Heading

Because many consumers now use multiple devices (smartphones like iPhone, PCs like iMac, and tablet devices like iPad), all of them need a way to share the music, photos, videos, files, and apps that reside on any one device. Enter iCloud (opposite page), “which will now be the center of your digital life,” as Steve Jobs explained in mid-2011. “iCloud stores all your content and wirelessly pushes any changes or purchases from one device automatically [up to the ‘cloud’ and then] down to all your other devices. Consumers won’t have to worry about syncing their devices any longer to transfer their data. With iCloud, it will just work!”4 Welcome to cloud computing, which involves moving the data and processing tasks normally hosted on your own device onto a remote data center server accessible via the Internet or Wi-Fi.5

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The life of an organization depends on how it conceives, produces, and markets new products (goods, services, and ideas), the topic of this chapter. Many examples involve small businesses facing the difficult task of launching a successful start-up. Chapter 11 discusses the process of managing existing products, services, and brands.

WHAT ARE PRODUCTS AND SERVICES?

The essence of marketing is in developing products and services to meet buyer needs. A product is a good, service, or idea consisting of a bundle of tangible and intangible attributes that satisfies consumers’ needs and is received in exchange for money or something else of value. Let’s clarify the meanings of goods, services, and ideas.

LO 10-1Recognize the various terms that pertain to products and services.

A Look at Goods, Services, and Ideas

A good has tangible attributes that a consumer’s five senses can perceive. For example, Apple’s iPad can be touched and its features can be seen and heard. A good also may have intangible attributes consisting of its delivery or warranties and embody more abstract concepts, such as becoming healthier or wealthier. Goods also can be divided into nondurable goods and durable goods. A nondurable good is an item consumed in one or a few uses, such as food products and fuel. A durable good is one that usually lasts over many uses, such as appliances, cars, and smartphones. This classification method also provides direction for marketing actions. For example, nondurable goods, such as Wrigley’s gum, rely heavily on consumer advertising. In contrast, costly durable goods, such as cars, generally emphasize personal selling.

Services are intangible activities or benefits that an organization provides to satisfy consumers’ needs in exchange for money or something else of value. Services have become a significant part of the U.S. economy, reaching almost 50 percent of its gross domestic product.6 Hence, a product may be the breakfast cereal you eat, whereas a service may be a tax return an accountant fills out for you.

Finally, in marketing, an idea is a thought that leads to a product or action, such as a concept for a new invention or getting people out to vote.

Throughout this book, product generally includes not only physical goods but services and ideas as well. When product is used in its narrower meaning of “goods,” it should be clear from the example or sentence.

Nondurable goods like chewing gum are easily consumed and rely on consumer advertising.

LO 10-2Identify the ways in which consumer and business products and services can be classified.

Classifying Products

Two broad categories of products widely used in marketing relate to the type of user. Consumer products are products purchased by the ultimate consumer, whereas business products (also called B2B products or industrial products) are products organizations buy that assist in providing other products for resale. Some products can be considered both consumer and business items. For example, an Apple iMac computer can be sold to consumers for personal use or to business firms for office use. Each classification results in different marketing actions. Viewed as a consumer product, the iMac would be sold through Apple’s retail stores or directly from its online store. As a business product, an Apple salesperson might contact a firm’s purchasing department directly and offer discounts for large volume purchases.

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FIGURE 10–1

How a consumer product is classified significantly affects which products consumers buy and the marketing strategies used.

Consumer Products The four types of consumer products shown in Figure 10–1 differ in terms of (1) the effort the consumer spends on the decision, (2) the attributes used in making the purchase decision, and (3) the frequency of purchase. Convenience products are items that the consumer purchases frequently, conveniently, and with a minimum of shopping effort. Shopping products are items for which the consumer compares several alternatives on criteria such as price, quality, or style. Specialty products are items that the consumer makes a special effort to search out and buy. Unsought products are items that the consumer does not know about or knows about but does not initially want.

Figure 10–1 shows how each type of consumer product stresses different marketing mix actions, degrees of brand loyalty, and shopping effort. But how a consumer product is classified depends on the individual. One woman may view a camera as a shopping product and visit several stores before deciding on a brand, whereas her friend may view a camera as a specialty product and make a special effort to buy only a Nikon.

Business Products A major characteristic of business products is that their sales are often the result of derived demand; that is, sales of business products frequently result (or are derived) from the sale of consumer products. For example, as consumer demand for Ford cars (a consumer product) increases, the company may increase its demand for paint spraying equipment (a business product).

Business products may be classified as components or support products. Components are items that become part of the final product. These include raw materials such as lumber, as well as assemblies such as a Ford car engine. Support products are items used to assist in producing other products and services. These include:

•Installations, such as buildings and fixed equipment.

•Accessory equipment, such as tools and office equipment.

•Supplies, such as stationery, paper clips, and brooms.

•Industrial services, such as maintenance, repair, and legal services.

Strategies to market business products reflect both the complexities of the product involved (paper clips versus private jets) and the buy-class situations discussed in Chapter 6.

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Classifying Services

Services can be classified according to whether they are delivered by (1) people or equipment, (2) business firms or nonprofit organizations, or (3) government agencies. These classifications are more thoroughly discussed in Chapter 12.

Product Classes, Forms, Items, Lines, and Mixes

Most organizations offer a range of products and services to consumers. Each set of offerings can be categorized according to the product class or industry to which they belong, like the iPad, which is classified as a tablet device. Products can exist in various product forms within a product class (see Chapters 2 and 11). A product item is a specific product that has a unique brand, size, or price. For example, Ultra Downy softener for clothes comes in different forms (liquid for the washer and sheets for the dryer) and load sizes (40, 60, etc.). Each of the different product items represents a separate stock keeping unit (SKU), which is a unique identification number that defines an item for ordering or inventory purposes.

QR 10-2

Crapola Video

A product line is a group of product or service items that are closely related because they satisfy a class of needs, are used together, are sold to the same customer group, are distributed through the same outlets, or fall within a given price range. Nike’s product lines include shoes and clothing, whereas the Mayo Clinic’s service lines consist of inpatient hospital care and outpatient physician services. Each product line has its own marketing strategy.

The “Crapola Granola” product line started as an edgy party joke from Brian and Andrea Strom, owners of tiny Brainstorm Bakery. The dried CRanberries and APples granOLA—hence the “Crapola” name—also contains nuts and five organic grains sweetened with maple syrup and honey. Its package promises that Crapola “Makes Even Weird People Regular.”

What company cheerfully tells Its customers to “Have a crappy day”? Read the text to find out about this “tasty” offering!

Mentioned on TV by Jay Leno, Crapola is sold in retail outlets in the Midwest, California, and Oregon as well as online at www.crapola.us. The Stroms have a strategy of developing Crapola into a broader product line. Currently, they offer two other recipes: “Number Two” and “Red, White, and Blueberry.” These product line extensions enable both consumers and retailers to simplify their buying decisions. So if a family has a good experience with Crapola, it might buy another product in the line. With a more extensive product line, the Stroms may manage to obtain distribution and shelf space in supermarket chains, which strive to increase efficiencies by dealing with fewer suppliers.7

Many firms offer a product mix , which consists of all of the product lines offered by an organization. For example, Cray Inc. has a small product mix of three product lines (supercomputers, storage systems, and a “data appliance”) that are sold mostly to governments and large businesses. Procter & Gamble, however, has a large product mix that includes product lines such as beauty and grooming (Crest toothpaste and Gillette razors) and household care (Downy fabric softener, Tide detergent, and Pampers diapers).

learning review

10-1. What are the four main types of consumer products?

10-2. What is the difference between a product line and a product mix?

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Marketing Matters

customer value

Feature Bloat: Geek Squad to the Rescue!

Adding more features to a product to satisfy more consumers seems like a no-brainer strategy for success. Right?

Feature Bloat

In fact, most marketing research with potential buyers of a product shows that while they say they want more features, in actuality they are overwhelmed with the mind-boggling complexity—or “feature bloat”—of some new products.

Computers pose a special problem for home users because there’s no in-house technical assistance like that existing in large organizations. Ever call the manufacturer’s toll-free “help” line? One survey showed that 29 percent of the callers swore at the customer service representative and 21 percent just screamed.

Geek Squad to the Rescue

Computer feature bloat has given rise to what TV’s 60 Minutes says is “the multibillion-dollar service industry populated by the very people who used to be shunned in the high school cafeteria: Geeks like Robert Stephens!”

More than a decade ago he turned his geekiness into the Geek Squad—a group of technically savvy people who can fix almost any computer problem.

“The biggest complaint about tech support people is rude, egotistical behavior,” says Stephens. So he launched the Geek Squad to show some friendly humility by having team members work their wizardry while:

1.Showing genuine concern to customers.

2.Dressing in geeky white shirts, black clip-on ties, and white socks, a “uniform” borrowed from NASA engineers.

3.Driving to customer homes or offices in black-and-white VW “geekmobiles.”

Do customers appreciate the 20,000-person Geek Squad, now owned by Best Buy? Robert Stephens answers by explaining, “People will say, ‘They saved me … they saved my data.’” This includes countless college students working on their papers or theses with data lost somewhere in their computers—“data they promised themselves they’d back up next week.”

See the video case that concludes Chapter 3 for more on the Geek Squad.

NEW PRODUCTS AND WHY THEY SUCCEED OR FAIL

New products are the lifeblood of a company and keep it growing, but the financial risks can be large. Before discussing how new products reach the market, we’ll begin by looking at what a new product is.

LO 10-3Explain the significance of “newness” in new products and services as it relates to the degree of consumer learning involved.

What Is a New Product?

The term new is difficult to define. Is Sony’s PlayStation 4 new when there is already a PlayStation 3? Perhaps—because the PS4, Nintendo’s Wii U, and Microsoft’s new Xbox One will all position their consoles as entertainment “hubs” rather than just game consoles.8 What does new mean for new-product marketing? Newness from several points of view are discussed next.

Newness Compared with Existing Products If a product is functionally different from existing products, it can be defined as new. Sometimes this newness is revolutionary and creates a whole new industry, as in the case of the Apple II computer. At other times more features are added to an existing product to try to appeal to more customers. And as HDTVs, smartphones, and tablet devices become more sophisticated, consumers’ lives get far more complicated. This proliferation of extra features—sometimes called “feature bloat”—overwhelms many consumers. The Marketing Matters box describes how founder Robert Stephens launched his Geek Squad to address the rise of feature bloat.9

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FIGURE 10–2

The degree of “newness” in a new product affects the amount of learning effort consumers must exert to use the product and the resulting marketing strategy.

Newness from the Consumer’s Perspective A second way to define new products is in terms of their effects on consumption. This approach classifies new products according to the degree of learning required by the consumer, as shown in Figure 10–2.

With a continuous innovation, consumers don’t need to learn new behaviors. Toothpaste manufacturers can add new attributes or features like “whitens teeth” or “removes plaque” when they introduce a new or improved product, such as Colgate Total Advanced Gum Defense toothpaste. But the extra features in the new toothpaste do not require buyers to learn new tooth-brushing behaviors, so it is a continuous innovation. The benefit of this simple innovation is that effective marketing mainly depends on generating awareness, not re-educating customers.

With a dynamically continuous innovation, only minor changes in behavior are required. Heinz launched its EZ Squirt Ketchup in an array of unlikely hues—from green and orange to pink and teal—with kid-friendly squeeze bottles and nozzles.10 Encouraging kids to write their names on hot dogs or draw dinosaurs on burgers as they use this new product requires only minor behavioral changes. So the marketing strategy here is to educate prospective buyers on the product’s benefits, advantages, and proper use.

For how the kind of innovation present in this ketchup bottle affects its marketing strategy, see the text.

A discontinuous innovation involves making the consumer learn entirely new consumption patterns to use the product. Have you bought a wireless router for your computer? Congratulations if you installed it yourself! Recently, one-third of those bought at Best Buy were returned because they were too complicated to set up—the problem with a discontinuous innovation. So marketing efforts for discontinuous innovations usually involve not only gaining initial consumer awareness but also educating consumers on both the benefits and proper use of the innovative product, activities that can cost millions of dollars—and maybe require Geek Squad help.

Newness in Legal Terms The U.S. Federal Trade Commission (FTC) advises that the term new be limited to use with a product up to six months after it enters regular distribution. The difficulty with this suggestion is in the interpretation of the term regular distribution.

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Newness from the Organization’s Perspective Successful organizations view newness and innovation in their products at three levels. The lowest level, which usually involves the least risk, is a product line extension. This is an incremental improvement of an existing product line the company already sells. For example, Purina added its “new” line of Elegant Medleys, a “restaurant-inspired food for cats,” to its existing line of 50 varieties of its Fancy Feast gourmet cat food. This has the potential benefit of adding new customers but the twin dangers of increasing expenses and cannibalizing products in its existing line.

At the next level is (1) a significant jump in innovation or technology or (2) a brand extension involving putting an established brand name on a new product in an unfamiliar market. In the first case, the significant jump in technology might be when a manufacturer offers new smartphones or digital cameras.

The text describes the potential benefits and dangers of an incremental innovation such as Purina’s Elegant Medleys, its restaurant-inspired food for cats.

The second case—using an existing brand name to introduce a new product into an unfamiliar market—looks deceptively easy for companies with a powerful, national brand name. Colgate thought so. It puts its brand name on a line of frozen dinners called Colgate’s Kitchen Entrees. The product line died quickly. A marketing expert calls this “one of the most bizarre brand extensions ever,” observing that the Colgate brand name, which is strongly linked to toothpaste in people’s minds, does not exactly get their “taste buds tingling.” Cosmopolitan’s yogurt had the same problem. The magazine, which has 58 international editions, is distributed in more than 100 countries. Cosmopolitanhas the magazine business down pat. One thing Cosmo does not do best is brand and sell yogurt. Its Cosmopolitan Yogurt disappeared from retail shelves in 18 months.11

The third and highest level of innovation involves a radical invention, a truly revolutionary new product. Apple’s Apple II, the first commercially successful “personal computer,” and its iPad and iPod are examples of radical inventions. Effective new-product development in large firms exists at all three levels.

Why Products and Services Succeed or Fail

We all know the giant product and service successes—such as Apple’s iPad, Google, and CNN. Yet the thousands of product failures every year that slide quietly into oblivion cost American businesses billions of dollars. Ideally, a new product or service needs a precise protocol , a statement that, before product development begins, identifies (1) a well-defined target market; (2) specific customers’ needs, wants, and preferences; and (3) what the product will be and do to satisfy consumers.

Research reveals how difficult it is to produce a single commercially successful new product, especially among consumer packaged goods (CPG) that appear on supermarket shelves one month and are gone forever a few months later. Most American families buy the same 150 items over and over again—making it difficult to gain buyers for new products. So less than 3 percent of new consumer packaged goods exceed first-year sales of $50 million—the benchmark of a successful CPG launch.12

A yogurt marketed by Cosmopolitan magazine? See the text for details.

To learn marketing lessons and convert potential failures to successes, we can analyze why new products fail and then study several failures in detail. As we go through the new-product process later in the chapter, we can identify ways such failures might have been avoided—admitting that hindsight is clearer than foresight.

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LO 10-4Describe the factors contributing to the success or failure of a new product or service.

Marketing Reasons for New-Product Failures Both marketing and nonmarketing factors contribute to new-product failures. Using the research results from several studies on new-product success and failure, we can identify critical marketing factors—which sometimes overlap—that often separate new-product winners and losers:13

1. Insignificant point of difference. Research shows that a distinctive point of difference is the single most important factor for a new product to defeat competing ones—having superior characteristics that deliver unique benefits to the user. In the mid-1990s, General Mills launched Fingos, a sweetened cereal flake about the size of a corn chip, with a $34 million promotional budget. Consumers were supposed to snack on them dry, but they didn’t.14The point of difference was not important enough to get consumers to stop eating competing snacks such as popcorn and potato chips.

New-product success or failure? Why might consumers choose not to buy sweetened corn flakes as a snack …

2. Incomplete market and product protocol before product development starts. Without this protocol, firms try to design a vague product for a phantom market. Developed by Kimberly-Clark, Avert Virucidal tissues contained vitamin C derivatives scientifically designed to kill cold and flu germs when users sneezed, coughed, or blew their noses into them. The product failed in test marketing. People didn’t believe the claims and were frightened by the “cidal” in the brand name, which they connected to words like suicidal. A big part of Avert’s failure was its lack of a product protocol that clearly defined how it would satisfy consumer wants and needs.15

3. Not satisfying customer needs on critical factors. Overlapping somewhat with point 1, this factor stresses that problems on one or two critical factors can kill the product, even though the general quality is high. For example, the Japanese, like the British, drive on the left side of the road. Until 1996, U.S. carmakers sent Japan few right-hand-drive cars—unlike German carmakers, which exported right-hand-drive models in several of their brands.

4. Bad timing. This results when a product is introduced too soon, too late, or when consumer tastes are shifting dramatically. Bad timing gives new-product managers nightmares. Microsoft, for example, introduced its Zune player a few years after Apple launched its iPod and other competitors offered their new MP3 players.

5. No economical access to buyers. Grocery products provide an example of this factor. Today’s mega-supermarkets carry more than 30,000 different SKUs. With about 40,000 new consumer packaged goods (food, beverage, health and beauty aids, household, and pet items) introduced annually in the United States, the cost to gain access to retailer shelf space is huge. Because shelf space is judged in terms of sales per square foot, Thirsty Dog! (a zesty beef-flavored, vitamin-enriched, mineral-loaded, lightly carbonated bottled water for your dog) must displace an existing product on the supermarket shelves, a difficult task with the high sales-per-square-foot demands of these stores. Thirsty Dog! and its companion product Thirsty Cat! failed to generate enough sales to meet these requirements.

… or a vitamin-enriched carbonated bottled water for their dog or cat …

6. Poor product quality. This factor often results when a product is not thoroughly tested. The costs to an organization for poor quality can be staggering and include the labor, materials, and other expenses to fix the problem—not to mention the lost sales, profits, and market share that usually result. In early 2007, with a $500 million promotional budget, Microsoft launched its Windows Vista to replace its successful predecessor Windows XP. But the Vista software had so many quality problems with compatibility and performance, even Microsoft’s most loyal users revolted. Today its problems would be highlighted even faster as Facebook and Twitter users post their complaints.16

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7. Poor execution of the marketing mix: brand name, package, price, promotion, distribution. Somewhere in the marketing mix there can be a showstopper that kills the product. Introduced by Gunderson & Rosario, Inc., Garlic Cake was supposed to be served as an hors d’oeuvre with sweet breads, spreads, and meats, but somehow the company forgot to tell this to potential consumers. Garlic Cake died because consumers were left to wonder just what a Garlic Cake is and when on earth a person would want to eat it.

… or a spray to get rid of scary creatures from a child’s bedroom? Answers appear in the text.

8. Too little market attractiveness. The ideal is a large target market with high growth and real buyer need. But often the target market is too small or competitive to warrant the huge expenses necessary to reach it. OUT! International’s Hey! There’s A Monster In My Room spray was designed to rid scary creatures from a kid’s bedroom and had a bubble-gum fragrance. While a creative and cute product, the brand name probably kept the kids awake at night more than their fear of the monsters because it implied the monster was still hiding in the bedroom. Also, was this a real market?

Simple marketing research should have revealed the problems in these new-product disasters. Developing successful new products may sometimes involve luck, but more often it involves having a product that really meets a need and has significant points of difference over competitive products.

Organizational Inertia in New-Product Failures Organizational problems and attitudes can also cause new-product disasters. Two key ones are:

•Encountering “groupthink” in task force and committee meetings. Someone in the new-product planning meeting knows or suspects the product concept is a dumb idea. But that person is afraid to speak up for fear of being cast as a “negative thinker,” “not a team player,” and then being ostracized from real participation in the group. Do you think someone on the Life Savers new-product team suspected a Life Savers soda wasn’t a good idea but was afraid to speak up?17 In the same way, a strong public commitment to a new product by its key advocate may make it difficult to kill the product even when new negative information comes to light.18

•Avoiding the “NIH problem.” A great idea is a great idea, regardless of its source. Yet in the bureaucracy that can occur in large organizations, ideas from outside often get rejected simply because they come from outside—what has been termed the “not-invented-here (NIH) problem.” NIH was never a problem for Steve Jobs. Part of his innovation genius was being open to ideas from everywhere. Jobs got the ideas for the mouse and the graphical user interface, which led to icons and pull-down menus for the Macintosh, from visits to the Xerox Corporation’s Palo Alto Research Center, known as Xerox PARC.19

Introduce a Life Savers soda? The text asks if “groupthink” played a part in this new-product decision.

These organizational problems can contribute to the eight marketing reasons for new-product failures described above.

How Marketing Dashboards Can Improve New-Product Performance

The Using Marketing Dashboards box on the next page shows how marketers measure actual market performance versus the goals set in new-product planning. It shows that you have set a goal of 10 percent annual growth for the new snack you developed. You have chosen a marketing metric of “annual % sales change” to measure the annual growth rate from 2012 to 2013 for each of the 50 states.

Your special concerns in the marketing dashboard are the states shown in red, where sales have actually declined. As shown in the box, having identified the northeastern United States as a problem region, you can now conduct in-depth marketing research to lead to corrective actions. For example, is the decline in sales in this region due to an external factor, such as consumer preference? Perhaps consumers in the northeastern United States prefer more regional snack tastes or think your snack is too sweet. Or perhaps the problem is due to your own internal marketing strategy, such as poor distribution, prices that are too high, or ineffective advertising.

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Using Marketing Dashboards

Which States Are Underperforming?

In 2010, you started your own company to sell a nutritious, high-energy snack you developed. It is now January 2014. As a marketer, you ask yourself, “How well is my business growing?”

Your Challenge The snack is sold in all 50 states. Your goal is 10 percent annual growth. To begin 2014, you want to quickly solve any sales problems that occurred during 2013. You know that states whose sales are stagnant or in decline are offset by those with greater than 10 percent growth.

Studying a table of the sales and percent change versus a year ago in each of the 50 states would work but be very timeconsuming. A good graphic is better. You choose the following marketing metric, where “sales” are measured in units:

You want to act quickly to improve sales. In your map, growth that is greater than 10 percent is green, 0 to 10 percent growth is orange, and decline is red. Notice that you (1) picked a metric and (2) made your own rules that green is good, orange is bad, and red is very bad.

Your Findings You see that sales growth in the northeastern states is weaker than the 10 percent target, and sales are actually declining in many of the states.

Your Action Marketing is often about grappling with sales shortfalls. You’ll need to start by trying to identify and correct the problems in the largest volume states that are underperforming—in this case in the northeastern United States.

You’ll want to do marketing research to see if the problem starts with (1) an external factor involving consumer tastes or (2) an internal factor such as a breakdown in your distribution system.

learning review

10-3. What kind of innovation would an improved electric toothbrush be?

10-4. Why can an “insignificant point of difference” lead to new-product failure?

10-5. What marketing metric might you use in a marketing dashboard to discover which states have weak sales?

THE NEW-PRODUCT PROCESS

To develop new products efficiently, companies such as General Electric and 3M use a specific sequence of steps to make their products ready for market. Figure 10–3 shows the new-product process , the seven stages an organization goes through to identify opportunities and convert them into salable products or services. Today many firms use a formal Stage-Gate® process to evaluate whether the results at each stage of the new-product development process are successful enough to warrant proceeding to the next stage. If problems in a stage can’t be corrected, the project doesn’t proceed to the next stage and product development is killed.20

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FIGURE 10–3

Carefully using the seven stages in the new-product process increases the chances of new-product success.

LO 10-5Explain the purposes of each step of the new-product process.

Stage 1: New-Product Strategy Development

For companies, new-product strategy development is the stage of the new-product process that defines the role for a new product in terms of the firm’s overall objectives. During this stage, the firm uses both a SWOT analysis (Chapter 2) and environmental scanning (Chapter 3) to assess its strengths and weaknesses relative to the trends it identifies as opportunities or threats. The outcome not only defines the vital “protocol” for each new-product idea but also identifies the strategic role it might serve in the firm’s business portfolio.